BNY Mellon turns neutral on Chinese stocks and bearish on yuan in light of weak economic data
- BNY Mellon has joined Citigroup and Jefferies in becoming less bullish on Chinese stocks, after economic data fell short of estimates in April
- The US asset manager recommends investing in equities in Thailand and Singapore as proxies to China’s reopening
BNY Mellon recommends shifting to equities in Thailand and Singapore as proxies to China’s reopening, which stand to benefit from outbound travel and private capital flows and are less susceptible to geopolitical risks, he said.
BNY Mellon has joined Citigroup and Jefferies Financial Group in lowering its recommendation on Chinese stocks, after economic data fell short of estimates across the board in April and producer prices dropped at the fastest pace in three years. The sentiment on Chinese assets has soured recently, with the yuan breaching the 7 level against the US dollar and foreign investors turning into net sellers of Chinese equities.
“Alongside weakening activity, intensifying economy-wide disinflation and weakening business and investor confidence are particularly troubling,” said Mitra.
The 3.6 per cent decline in producer prices in April was a reflection of the nation’s industrial overcapacity and the housing inventory, which would chip away at corporate pricing power, he said. Meanwhile, the price-to-earnings multiple would continue to be suppressed by Beijing’s crackdown on the private sector and the simmering US-China tension, he added.